Three Essays on Trade Policy in a Multi-Country World

Authors

Enrique ValdesFollow

Document Type

Dissertation

Degree

Doctor of Philosophy (PhD)

Major/Program

Economics

First Advisor's Name

Kaz Miyagiwa

First Advisor's Committee Title

Committee chair

Second Advisor's Name

Cem Karayalcin

Second Advisor's Committee Title

Committee member

Third Advisor's Name

Norihiko Matsuda

Third Advisor's Committee Title

Committee member

Fourth Advisor's Name

Sneh Gulati

Fourth Advisor's Committee Title

Committee member

Keywords

International Trade, Ricardian Trade Model, Tariff War, Customs Union, Embargo, Nonhomothetic preferences

Date of Defense

6-27-2022

Abstract

This dissertation involves analyzing welfare in developing countries due to a variety of trade policies. Because all three chapters focus on developing countries and their interactions with more developed countries, we need a model that accounts for differences in income between countries, easily extending to more than two countries. For our analysis, we draw on the Ricardian model developed by Matsuyama (2000).

The first chapter investigates the effects tariff wars have on developing countries. We study the effect of a tariff war between two richer countries on a non-participant low-income developing country. Surprisingly, we find that the low-income country can benefit from tariff war and even be the sole beneficiary of the tariff war. Lastly, we find that the low-income country can also influence the outcome of a tariff war. For instance, its growth in size exacerbates the structural disadvantage suffered by the middle-income country and helps the high-income country win the tariff war.

In the second chapter, we ask if developing countries are better off forming customs unions or signing free trade agreements. We focus on developing countries that have identical production technologies. Utilizing a numerical analysis, we find that if the developing countries are of equal population, they will be better off forming a customs union than signing a free trade agreement. Additionally, when developing countries have asymmetric populations, the country with the larger population will always prefer a custom union, while the smaller country may prefer a free trade agreement.

In the third chapter, we assume that the world is divided into three countries with different income levels. Moreover, we assume the richest country is embargoing goods from the middle-income country. We ask whether a low-income country could improve its welfare by joining the high-income country in embargoing goods from a middle-income country. We find that the lower-income country will always be worse off due to restricting trade with the middle-income country. Surprisingly, for a partial embargo, the welfare of the middle-income country could rise.

Identifier

FIDC010766

ORCID

0000-0002-2185-0093

Recommended Citation

Valdes, Enrique, "Three Essays on Trade Policy in a Multi-Country World" (2022). FIU Electronic Theses and Dissertations. 5019.
https://digitalcommons.fiu.edu/etd/5019